Can anyone steer me in the right direction for CUTE novelty items to sell in a cake shop?
Are you thinking cupcake type jewelry? Teapots? bookmarks? Toys?
It depends on the image that you would like your shop to portray.
Google your local wholesale gift mart. There will be a list of vendors. that may give you some further ideas.
I agree, decide on a "theme" or direction that's unique and go from there. You want to set yourself apart and offer something that other decorators/bakeries near you don't. Are you going to be modern, funky, vintage, traditional, girly? You don't want the atmosphere of your store to be too many things.